Feb. 27 (Bloomberg) -- Australian opposition leader Tony
Abbott, favored to win the Sept. 14 election, is unlikely to
fulfill his pledge of scrapping the nation’s carbon price,
according to Bloomberg New Energy Finance.

While Abbott’s Liberal-National coalition is leading in
opinion polls and likely to win office, it probably won’t secure
enough seats in parliament’s upper house Senate to repeal Prime
Minister Julia Gillard’s Clean Energy Act, Seb Henbest, a
Sydney-based carbon analyst for BNEF, wrote in a report
published today.

“We estimate that there is about a one-in-three chance of
repeal,” Henbest wrote. “The most likely result is a new
coalition government which finds a way to live with the carbon
price.”

Abbott has given voters a “pledge in blood” that he will
scrap the levy for about 300 of the nation’s largest polluters,
calling it a wrecking ball for Australia’s A$1.45 trillion
($1.48 trillion) economy. Political uncertainty about the Carbon
Price Mechanism is likely to continue until at least the second
half of next year, according to BNEF.

“The judgments in the report couldn’t be more
inaccurate,” Shadow Climate Minister Greg Hunt said in a phone
interview from Sydney today. “The next election will be a
referendum on the carbon tax. We expect that if the Labor party
is defeated it would not oppose repeal of the carbon tax.”

Greenhouse Gases

The carbon price is the government’s main tool for reducing
the country’s reliance on coal and meeting its target for a 5
percent cut in greenhouse gases from 2000 levels by 2020. The
legislation was passed by Parliament in November 2011 and came
into effect on July 1 as a fixed price of A$23 per ton of
emissions for the first year of the program.

Fixed emission costs for the first three years are set to
be replaced in 2015 by a cap-and-trade system in which market
forces help determine the price of pollution permits.

The government amended its carbon legislation in August
2012, linking Australia’s emissions market to the world’s
largest cap-and-trade system in the European Union. The
revisions enabled emitters to begin immediately buying EU
permits for compliance in Australia, helping to alleviate their
reluctance to buy domestic allowances that might become
worthless under a new government.

Australia’s Climate Change Authority said Feb. 18 it’s
proceeding with plans to recommend a target for 2020 emissions
and review annual limits under the Carbon Price Mechanism for
the four years starting in 2015.

The earliest Abbott could repeal the carbon price
legislation is after July 2014 if the coalition gains control of
the upper house, according to the report.

Double Dissolution

Without a majority in the upper chamber, Abbott would have
to dissolve both houses in a so-called double dissolution
election to have a chance of gaining the Senate control needed
to scrap the legislation. That would extend the first
opportunity to repeal the carbon price to about the first half
of 2015, Bloomberg New Energy Finance said.

“While business must comply with current obligations under
the carbon price mechanism, it must also manage the ongoing
political uncertainty,” Henbest wrote. “Some firms are
actively looking to acquire EU allowances while prices languish
in record-low territory, while others appear to be waiting for a
definitive political signal they are hopeful will come in
September.”

EU emission allowances for December delivery fell to record
low of 2.81 euros ($3.70) last month amid speculation that
officials will fail to resolve an oversupply of permits. While
the contract rebounded to trade above 5 euros this week, it will
probably decline again if the European Parliament fails to
promptly address the glut, according to BNEF.

‘Abbott-Proof Fence’

It may prove difficult for Abbott to “re-engineer” the
Carbon Price Mechanism to undermine its economic impact without
repealing the legislation, according to the report. Creating an
oversupply of carbon allowances to push the price to zero, for
example, would require regulation that could be vetoed by a
hostile Senate, BNEF said.

“Commentators have coined the term ‘Abbott-Proof Fence,’
named after the 3,253 kilometer rabbit-proof fence that was
constructed in Western Australia between 1901 and 1907, to
describe the impenetrability of the Clean Energy Act and its
supporting legislation,” it said.

Abbott is leading in opinion polls, with support for the
coalition at 55 percent on a two-party preferred basis, compared
to 45 percent for Gillard’s Labor, according to a Newspoll
survey published in the Australian newspaper yesterday.

Slowing Growth

While Abbott’s “wrecking ball” forecast hasn’t
eventuated, there are signs economic expansion is slowing. The
Reserve Bank of Australia lowered its 2013 growth forecast to
about 2.5 percent on Feb. 8, from about 2.75 percent forecast in
November, citing weak investment outside the mining industry and
a stronger-than-expected currency.

Bloomberg New Energy Finance said it analyzed opinion
polls, voting preferences and market odds from online betting
companies to quantify the probability of the coalition winning
the election and gaining a majority in the Senate. BNEF also
analyzed the likelihood of Abbott calling and winning a double
dissolution election by reviewing the outcomes of six previous
instances in Australian history, the most recent in 1987.

Election Mandate

Labor considered the carbon price a “major economic
reform” and would be unlikely to view a coalition victory in
the election as a mandate for Abbott to scrap the mechanism,
Henbest wrote.

That view is disputed by the opposition’s Hunt.

“The primary assumption on which the Bloomberg New Energy
Finance report is based is an incorrect reading of Australian
politics,” Hunt said. “Our analysis is that the Australian
Labor Party is overwhelmingly likely, despite what they say now,
to step aside and not oppose the repeal of the carbon tax. If
they do, we have said we will go straight to a double
dissolution election.”